Business, Taxation

Tariff lines: government to seek concessions from China

Pakistan is likely to seek unilateral concession on 40-50 tariff lines from China during the visit of Prime Minister Nawaz Sharif starting from Friday (today). Prime Minister entourage will comprise Chief Ministers, Federal Ministers and officials. Commerce Minister, Engineer Khurram Dastgir Khan is also accompanying the Prime Minister.

“We have identified 40-50 items for unilateral concessions prior to entering into the second phase of Free Trade Agreement (FTA) which will be placed before the Chinese leadership. Relocation of Chinese industry is part of the agenda of Prime Minister,” said an official Pakistan, sources said, will also convey concerns of domestic industry to the Chinese side as incentives being offered to China in Special Economic Zones (SEZs) will be disincentives for the domestic industry. Pakistan and China have held several rounds on FTA-II but the outcome shows that both sides are still reluctant to proceed further due to disagreement on some of the issues.

Earlier, China had agreed to compensate Pakistan for losses in trade but later on the Chinese official backed out, saying that ””he did not understand English properly that””s why it was written in the minutes””. In December 2016 Pakistan and China held talks to review the FTA but failed to evolve a consensus on a methodology to further expand FTA after both sides expressed dissimilar claims of the impact on bilateral trade.

Pakistan-China volume of trade which was in the range of $4 billion in 2006-07 reached an all time high of $13.77 billion in 2015-16. The sources said, under-invoicing is one of the key issues between the two countries due to which a difference of at least $2 billion has been reported. Standing Committees of Senate and National Assembly on Commerce have also raised this issue on several occasions.

According to sources, Islamabad has taken principled decision that it will not go for FTA II until its concerns are resolved properly. Commerce Ministry has also sought Prime Minister””s guidance for further action. China, sources said, maintains that Pakistan has to follow the world with respect to liberalization if it wants to compete in the world. “China wants Pakistan to open 90 per cent of its trade immediately and is ready to give even 15 years for liberalization of ten per cent tariff,” the sources continued.

Commerce Ministry has conducted a study which shows that import of cheap raw material from China has increased competitiveness of Pakistan””s industry. In addition, the Commerce Ministry is calculating revenue impact of FTAs, expected this year, as Federal Board of Revenue (FBR) maintains that FTAs are inflicting a revenue loss.

Another official said that no scientific study has been conducted on CPEC””s likely impact on local industry and industry so far, and no one knows whether its impact would be positive or negative. During the meeting of December 2016, the Pakistani side highlighted the need for dovetailing all projects for co-operation between China and Pakistan including CPEC long term plan and CPFTA for integrating both the economies. In this regard, Pakistan referred to the protocol signed between the two countries in 2009 which provides a legal framework for incentivizing Chinese investment in Special Economic Zones and tariff reduction/elimination on the products manufactured in these zones. Both sides agreed to further hold internal consultations on ways and means to implement the protocol which was an integral part of CPFTA. The two sides had also agreed to discuss this issue in detail in the next round of negotiations. Commerce Minister argues that there is a delay in the finalization of FTA-II with China due to differences, adding that Pakistan will expand trade with China when imbalance of trade will be rectified.